Regulators OK $15B merger of troubled South Carolina utility

FILE - In this Sept. 21, 2016, file photo, V.C. Summer Nuclear Station's unit two's turbine is under construction near Jenkinsville, S.C., during a media tour of the facility. The Public Service Commission will determine at a meeting on Friday, Dec. 14, 2018 how much to cut rates for 737,000 South Carolina Electric & Gas customers who have already paid more than $2 billion for a pair of nuclear reactors abandoned during construction. (AP Photo/Chuck Burton, File)

A power company's $15 billion deal to purchase a troubled South Carolina-based utility after a costly nuclear construction failure won approval Friday from state regulators.

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Following more than an hour of comment and debate, South Carolina's Public Service Commission approved Virginia-based Dominion Energy's offer of cash and stock to buy SCANA Corp., the parent company of South Carolina Electric & Gas. The deal approved by commissioners would cut customer rates by about $22 a month — a smaller reduction than consumer advocates had requested.

Friday's vote marked a pivotal point in the unraveling of South Carolina's nuclear debacle, which started in the summer of 2017 when privately-owned SCANA and its minority partner, state-owned Santee Cooper, abandoned the reactors they had spent a decade planning and building at the V.C. Summer Nuclear Station.

The main contractor, Westinghouse, went bankrupt as it failed to make good on its promises of cheaper, easier construction methods. Projections of soaring electricity demand never materialized, thanks to energy efficiency and the advent of cheap natural gas.

About 737,000 SCE&G ratepayers have already paid more than $2 billion toward the project, which never produced any electricity. Thousands of project workers lost their jobs. The disaster spawned myriad lawsuits, as well as state and federal investigations. On Friday, commissioners defeated an amendment that said SCE&G had lied to them about the project in order to get rate increases.

For most of the past 18 months, South Carolina political leaders told SCE&G and Dominion they weren't doing enough to ease the ratepayers' burden. But Attorney General Alan Wilson and House Speaker Jay Lucas ultimately backed Dominion's latest offer, which the state's own consumer advocate and environmental and consumer groups said fell short.

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In a release after Friday's vote, Gov. Henry McMaster said that he felt state regulators had done their best to resolve a mess.

"Since we learned of SCANA and Santee Cooper's decision to abandon the VC Summer Project, my goal has been to ensure that the customers bear no burden for the failings of others," McMaster said. "The Public Service Commission - which I am confident has vigorously sought to make the best of a bad situation - has conducted a transparent, open process and has carefully deliberated the positions of ratepayers, the power companies, and the court."

During legislative debate about the debacle, McMaster said repeatedly he didn't think ratepayers should have to shoulder any of the project's burden going forward. Legislators ultimately overrode his veto of a measure that removed all but $5 of the monthly surcharge to pay toward the defunct endeavor.

McMaster and some lawmakers want to sell Santee Cooper, which has $8 billion in debt, much of it from the failed reactor project. A legislative committee has set a mid-January deadline for any offers, emphasizing they have not made a definitive decision on whether to sell.

Dominion's latest offer gets rid of the $1,000 rebate checks to SCE&G customers that dominated much of the merger discussion in 2018. Instead, Dominion proposed keeping SCE&G rates at the same level set by legislators who passed a temporary 15 percent rate cut earlier this year that knocks about $22 off the typical monthly bill.

In 20 years, SCE&G customers would add $2.3 billion to the $2 billion they already paid for the mothballed project.

Most of the consumer advocacy groups had pushed for more. Watchdogs in the state's Office of Regulatory Staff wanted about a 20 percent rate cut, removing closer to $30 from monthly bills, and eliminating most of the extra charges for the reactors. Consumers and environmental groups wanted a bigger cut.

Dominion Energy said a larger rate cut would force them to walk away from the SCE&G deal, although they made the same threat when lawmakers considered the temporary cut. When that passed, they altered their merger proposal.

SCE&G said a significant rate cut without the extra money from the Dominion deal would mean bankruptcy, although utility executives testified before regulators they could not guarantee that's what they would do.

Public Service Commission Chairman Randy Comer said regulators' hands remained tied by a law passed in 2007 that greatly reduced their ability to scrutinize rate hikes.

The Base Load Review Act allowed the utility to get rate increases to essentially pay in advance for the reactors without risk to its shareholders, and set a high bar to get that money back. There have been legal challenges, but the law is still in place.